The 90% physical piracy rate obviously puts the kibosh on your average high street retailer. FAB, the only significant legal high street chain is really out there on its own. One large distributor lists only 86 other stand-alone legitimate stores stocking independent content, servicing the whole of China - A worrying figure in a country where you literally can’t move for audio-visual outlets and CD/DVD street hawkers. None of your HMVs, or your Virgin Megastores have dared set foot over here yet.
The arrival of western product in the early 90s came courtesy of ‘saw-gashed’ CDs: Excess stock and deleted titles from western majors attempting to avoid taxation and disposal costs. These CDs had their cases cut to mark them as defective and were then shipped in to China through free-market economic ports like Guangzhou, only to end up on the black market. An end result that can be seen as a partial ‘shooting-in-the-foot’ for the western majors who then had to come in and fight against the pirate networks they inadvertently helped set up.
A standard pirate CD retails for about 60 pence, whereas the legitimate product goes for around two to three times that – £1.50 to £2. This obviously makes piracy a big business with plenty of people profiting, plenty of vested interests and not a whole lot of will to change. There is the occasional very public haul of counterfeit CDs but realistically this is already a lost battle when you consider the impending end of the CD format, with corruption prevalent in every link of the chain.
CD manufacturing plants are mainly state run but this does not deter rampant ‘third shift piracy’ in which, once the two normal daily factory shifts are completed, a third one goes on through the night to make the same product for the pirate market. That’s right, state run piracy.
Distribution is also predominantly a state run affair (There are a few independents springing up though) and suffers from a mix of the distros having no clue about the mechanics of the industry beyond their remit and a healthy level of corruption, with product leaking up and down the supply line. Majors are really working hard to remedy this with progress being made along the lines of financial incentives to wholesalers and retailers to ensure product ends up on the shelves in a legal capacity. This kind of carrot-and-stick approach is widely used in China, where black-market money is right in front of people’s noses as opposed to the promise of legitimate money further down the line.
As with most areas of business, the retail sector is a black hole of statistics, where misinformation and mendaciousness are key pirate protection devices. A visit to China will clear this up for you nicely as you only have to wander around a few streets and speak to a few ‘legitimate’ retailers to see the impossibility of gathering any meaningful statistics. Even legitimate retailers like FAB stock some pirated goods and it takes a very keen eye to spot the difference in some cases, although most pirated CDs are laughably poor quality.
© Ed Peto 2007
NOTE: This is an extract from ‘Access China’ report commissioned by UK Trade and Industry Department and British Underground.
[...] I have moved my music industry blog to a new home at OUTdustry. Follow this link for my article on music retail in China. [...]
Posted by ed peto — China Indie Music Report : Retail on October 25th, 2008.